The Minimum Rate of Return Necessary to Attract an Investor

question 105

Multiple Choice

The minimum rate of return necessary to attract an investor to purchase or hold a security is referred to as the

• A) stock's beta.
• B) investor's risk premium.
• C) investor's required rate of return.
• D) risk-free rate.

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Definitions:

Residual Dividend Policy

A strategy where a company pays dividends out of the residual or leftover equity only after all project capital needs are met.

Target Capital Structure

The ideal mix of debt, equity, and other financing sources a company aims to hold, used to optimize its financial performance and risk profile.

Capital Budget

The budgeting process relating to expenses for major capital, or investment, projects and purchases in a company.

Total Dividend Payment

The sum of all dividends that a company pays out to its shareholders for a specific period.